Section 52: Application of premiums received on issue of shares
This section explains how companies must handle premiums received from issuing shares and the allowed uses of the securities premium account.
The section, clause by clause
What the section says
In plain terms
(1)Where a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount of the premium received on those shares shall be transferred to a “securities premium account” and the provisions of this Act relating to reduction of share capital of a company shall, except as provided in this section, apply as if the securities premium account were the paid-up share capital of the company.
When a company issues shares at a premium, it must transfer the total premium amount to a "securities premium account", which is subject to the same rules as the company's paid-up share capital, with some exceptions.
(2)Notwithstanding anything contained in sub-section (1), the securities premium account may be applied by the company—
The securities premium account can be used for specific purposes, including issuing fully paid bonus shares, writing off preliminary expenses, writing off expenses or commissions related to share or debenture issues, providing for premiums on redeemable preference shares or debentures, or purchasing the company's own shares or securities.
(2)(a)towards the issue of unissued shares of the company to the members of the company as fully paid bonus shares;
(2)(b)in writing off the preliminary expenses of the company;
(2)(c)in writing off the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company;
(2)(d)in providing for the premium payable on the redemption of any redeemable preference shares or of any debentures of the company; or
(2)(e)for the purchase of its own shares or other securities under section 68.
(3)The securities premium account may, notwithstanding anything contained in sub-sections (1) and (2), be applied by such class of companies, as may be prescribed and whose financial statement comply with the accounting standards prescribed for such class of companies under section 133,—
Certain prescribed classes of companies that follow specific accounting standards can also use the securities premium account to pay for unissued equity shares issued as bonus shares, write off equity share issue expenses, or purchase their own shares or securities.
(3)(a)in paying up unissued equity shares of the company to be issued to members of the company as fully paid bonus shares; or
(3)(b)in writing off the expenses of or the commission paid or discount allowed on any issue of equity shares of the company; or
(3)(c)for the purchase of its own shares or other securities under section 68.
The right-hand column is written from the section text, not quoted from it, and it has no legal force. Where the two differ, the left-hand column is the law.
Amendment notes
- 1. Subs. by Act 1 of 2018, s. 12, for “discounted price” (w.e.f. 9-2-2018).
- 2. Ins. by s. 12, ibid. (w.e.f. 9-2-2018).
- 3. Subs. by Act 22 of 2019, s. 9, for sub-section (3) (w.e.f. 2-11-2018).
This section refers to
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Reproduced from the official India Code print for reference. Check the current text on India Code before you rely on it, and read the section alongside its Rules. Nothing here is legal advice.